How does TNPL work?
Reduced to the bare bones, TNPL is the travel version of ‘buy now, pay later’ scheme, wherein you purchase merchandise and pay for it through EMIs. It is essentially a loan or credit you are taking while booking or taking a trip and staggering the payment for the same.
The online travel aggregators or other travel firms either tie up with banks, fintech companies, loan apps and third-party lenders, or offer credit through their own fintech arms. You can even approach the banks or third-party lenders directly for availing of the scheme. You can either pay partially or not at all while booking and do so later in a specified duration. You can avail of no-cost EMIs or pay an interest rate on the borrowed amount depending on the quantum of funds and the duration for which you are taking the loan.
Options & limitations
On the face of it, TNPL appears to be a simple scheme, but there is no homogeneity in the options that are currently being offered to customers. So whether it is the credit limit, interest rates, repayment tenures, start of repayment date, or travel expenses for which the loan is being offered,you will find as many options as there are players in the market.
A loose rule is that you can avail of the no-cost EMI if you can repay the amount within six months, but for many players this duration is even shorter, ranging from 1-3 months. This means that the window for repayment is small if you want to avoid paying any interest. Beyond this term, you will have to pay interest that typically ranges from 1-2.5% per month, or 12-30% annually. The total repayment term is usually between 12-18 months. When it comes to starting the EMI, there is a large variation again, with some players beginning the repayment term within a month of booking date, while others allow you to complete your trip before starting the EMI. There is also a penalty if you default on the EMI and it will impact your credit score as well.
The credit size being offered differs as well, with most offering a range that depends on your income, credit score and repayment ability. So, ZestMoney, which is available on travel platforms like MakeMyTrip, Yatra, EaseMyTrip, etc, has an upper credit limit of Rs.2 lakh, with no-cost EMI available for a three-month repayment plan. CASHe, on the other hand, gives loans from Rs.15,000-4 lakh, with a minimum income requirement ranging from Rs.15,000-50,000 per month and loan repayment term of 3-18 months.
While the average transaction size for an international travel loan is Rs.1.5 lakh for SOTC Travel, for Yatra, it is Rs.14,000-15,000 for domestic destinations and for international trips, it is Rs.65,000-70,000. “The credit size most in demand for domestic flights is Rs.14,300 and for international flights it is Rs.65,756,” says Bharatt Malik, Senior Vice-President, Flights, Yatra.com. You can take the loan for domestic and international packages, flights, hotels, sightseeing and other activities, but some players limit it to either of these options. The companies will also typically require you to undergo e-KYC, with identity and address proof, as well as credit score.
Should you opt for it?
Is TNPL different from swiping a credit card or taking a personal loan? In case of a credit card, you get a 30-45 day free credit, a term slightly shorter than the nocost EMI window for TNPL. However, if you convert the credit card bill into EMIs at 12-18%, it may turn out to be cheaper. Similarly, a personal loan may be less expensive if your bank offers a rate of less than 12%, which many currently do. The tenure of repayment in case of a personal loan is also longer and the penalty for EMI default is lesser, making it a better option. The TNPL scheme is advisable only if you can avail of the no-cost EMI plan and can repay within 1-6 months; if you are getting bigger discounts from the travel company or lender; if you need to travel in an emergency; or face a sudden shortage of funds. Since travel is a discretionary expense, it is better to save for the trip rather than pay an interest on the travel cost.
SAVE NOW, PAY LATER
The Multipl app allows you to invest for short-term goals like travel, and offers discounts via brand tie-ups.
If, instead of paying later, you’d rather plan ahead for your trip, consider Multipl, a first-of-its-kind app that has turned the concept of ‘buy now, pay later’ on its head. At first glance, it appears no different from any other investment advisory that helps you save for your goals like travel. However, it differs in two aspects. First, this ‘save now, pay later’ option is focused exclusively on financial planning for short-term to very short-term spending goals. Second, it sweetens the deal by tying up with different lifestyle brands and offering discounts ranging from 5-10% on the amount invested, in addition to any returns on your investment.
“These discounts are exclusive, over and above any native offers from these companies,” says Paddy Raghavan, CEO & Co-founder, Multipl. For travel, Multipl has tied up with MakeMyTrip, Yatra, EaseMyTrip, PickYourTrail, Beyonder, among others. “If you indicate an interest in a particular brand before you start investing, you can get additional benefits, say, an alpha of 2-3%. However, there is no compulsion to go with any particular brand on our platform, and you can simply take back the amount after the investing period,” says Raghavan.
So, if you want to save, say, Rs.1 lakh for a trip 10 months down the line, and decide to stick with MMT for making your travel bookings, you can start saving Rs.10,000 a month. Multipl will invest this sum in a mix of mutual funds, digital gold and P2P lending sites (with assured return). At the end of 10 months, you can claim the principal as well as return on investment, along with a discount of 10% currently being offered by MMT. While travel is the more popular spending goal, there are 15 other categories including insurance premium, wedding, home furnishing, buying jewellery or gadgets, etc. The goal terms are primarily lesser than a year, but can also be longer for essential spends.